Insurance stocks listed on US exchanges, including those of local insurers such as ACE, Mid Ocean and Mutual Risk Management, have plummeted in the last four months.

The local insurance stocks are, to an extent, victim of the fact they are in a sector currently unpopular with investors.

Although US analysts and local observers are bullish about local companies like Mutual Risk Management, and view ACE and EXEL as strong players, the sector as a whole is deemed "interest rate sensitive''.

One New York analyst said all insurance stock had slumped because of rising US interest rates. As a result, there has been a strong rotation away from financial stocks. However the analyst described ACE and EXEL as better positioned than the average US stock.

ACE stock is now trading at $28.50 -- down from $331 in early October. EXEL is trading at $44, down from $465 in early October.

"When investors view that interest rates are not going down, they tend to rotate to stocks that more positively correlate with the economy, such as cars, and other cyclical issues,'' he said.

Another analyst, Mr. Harry Radovich, of New York equity research group Dean, Witter, Reynolds said: "There has been a correction in the insurance industry stock, and stock like Mutual Risk Management is not immune to that, although it is operating very well''.

Mutual Risk Management, (MRM) headquartered in Bermuda since 1977, provides risk management services to clients in the United States, Canada and Europe seeking alternatives to traditional commercial insurance for certain risk exposures.

It was named one of the best foreign companies in the developed world by Forbes Magazine in November last year.

Mr. Radovich said MRM's quarterly earnings are on track, but the stocks have pulled back because of concerns about interest rates.

Mr. Robert Mulderig, chairman and chief executive officer at MRM, said the main reason for the insurance stock decline was expectations by investors that the insurance cycle would have turned around.

"The industry has been soft since 1987,'' said Mr. Mulderig. "Investors hoped it would harden after Hurricane Andrew, and it did firm on the property side, but that hasn't happened in casualty side.

"There was disappointment in the recent renewal season. It may be hard for the new Bermuda property catastrophe companies to make hard return on capital.

"On the casualty side, the stock decline was caused by despair. Investors have been waiting for a year, the cycle has turned and there is no sign that it will occur.

"The tendency is to sell off entire market sections,'' said Mr. Mulderig.

Investors, mainly mutual fund investors who are dominant in the US market, tend to sell off whole sectors when the mood is bearish, he said.

Although the outlook in Bermuda is strong, the stock is sold regardless. Mr.

Mulderig is happy with the performance of MRM's stock. "The stock is not down as much as other stocks in the sector,'' he said.

In early November, the stock reached a $32.75 high, and is now trading at $27.75 -- down 10 percent from its high.

"It is not great news, but I am generally pretty happy,'' he said. Mr.

Michael Lewis, senior insurance analyst at Dean Witter Reynolds also attributes the decline to the failure of commercial insurance rates to harden as anticipated. "As late summer approached, the prospect of an up-rating environment diminished, particularly in the property casualty area, and in fact did not happen,'' said Mr. Lewis.

The decline in stock value came after a year -- from September 1992 to September 1993 -- of strong performance by the insurance stocks. In the last three and a half months of 1993, profit taking began.

"At this point, there is no sign of improvement in the industry,'' said Mr.

Lewis.

However, the Bermuda insurance companies "operate in a firmer market environment'', he said.

"The property catastrophe market remains firm, but the long term concerns demand for coverage matching the increased capacity remains,'' he said. AIG stock is current at $907 -- down from $977 . Mid Ocean stock has slipped from $34.25 at October 2, down to $26.

ROBERT MULDERIG: `Generally pretty happy'